Let’s Make a Daily Deal — Pricier

By Kelli B. Grant

Daily deal sites tout savings of 50% or better on restaurants, yoga classes and other purchases, but their latest attempts at grabbing market share involve convincing consumers to spend more.

LivingSocial said Thursday it plans to launch a Chase-branded credit card with no annual fee. Cardholders will earn $10 worth of credits with the daily deal site for each month they make at least 10 purchases. Daily deal sites have also been experimenting with premium tiers. Last year, LivingSocial began offering LivingSocial Plus, which turns a $20 monthly fee into a $25 site credit. In February, Groupon began testing a $30 VIP membership that includes early access to select deals, the option to buy some deals after they expire, and more flexible refunds. A Living Social spokesman says the site has used programs to add value for its members. “The credit card provides our members with additional added value every time they make a purchase,” he says. Groupon did not respond to requests for comment.

Such programs are a way to generate loyalty amid fading interest in daily deal sites, says Greg Sterling, founding principal of Sterling Market Intelligence. “If you look at the buzz around the space this year as opposed to last year, it’s not what it was,” he says. “These businesses need to evolve.” Paid programs ensure consumers will look to make their daily deal purchases primarily from that site, even though there are hundreds of others making similar offers. There’s also value in the data generated, says Dan Hess, chief executive of aggregator site DealRadar.com. Deal sites can more easily observe how their most loyal customers behave, which might influence overall deal structure, pricing and timing over the long run.

But the value may be less clear for customers, experts say. “If consumers are regularly getting 50-80% off, what can they possibly offer in a VIP situation?” Sterling says. Consumers who choose not to pay up may find that popular deals sell out in the VIP pre-sale stage. Paying out for a membership could also prompt more impulse purchases to justify that up-front cost or to use up expiring credits. Plus, deals often include some un-covered costs, which add up over more deals purchased.

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